TOPIC 8 - Collective investments Flashcards
Which of the following is false in relation to qualifying life assurance policies?
a) Premiums cannot vary beyond specified limits.
b) The death benefit must be at least 101% of the bid value of the policy.
c) Premiums must be payable at least annually.
d) They must have a minimum term of 10 years.
b) The death benefit must be at least 101% of the bid value of the policy.
What percentage of a unit trust’s fund must be in cash or fixed-interest investments for distributions to be treated as interest payments?
a) At least 50%.
b) Up to 60%.
c) More than 60%.
d) At least 75%.
c) More than 60%.
Alan has an investment that guarantees a specific return over a five-year period, but some of his initial capital could be lost if the FTSE 100 fails to achieve a certain level by the end of the term. His investment is a:
a) structured deposit.
b) structured derivative product.
c) structured capital‑at‑risk product.
d) non-structured capital‑at‑risk product.
c) structured capital‑at‑risk product.
Jason wishes to cash in his unit trust holding. Which unit price will he receive in normal market conditions?
a) Bid price.
b) Cancellation price.
c) Offer price.
d) Creation price.
a) Bid price.
Which of the following is true in relation to unit trusts?
a) Distribution unit trusts pay regular capital amounts to investors from profits.
b) The trustee decides on appropriate investments for the trust.
c) The manager can create units to meet demand.
d) The manager is responsible for holding and controlling the fund’s assets.
c) The manager can create units to meet demand.
A friendly society tax-exempt savings plan:
a) offers similar taxation benefits to endowment policies.
b) is offered by proprietary organisations.
c) has a term between 10 and 25 years.
d) has a maximum annual savings limit of £270.
d) has a maximum annual savings limit of £270.
Which function is responsible for overseeing the operation of an open-ended investment company and safeguarding investor interests?
a) The depositary.
b) The authorised corporate director.
c) The manager.
d) The trustee.
a) The depositary.
Which of the following is true in relation to real estate investment trusts?
a) At least 80% of the profit must result from property rentals.
b) At least 90% of profits must be distributed to shareholders.
c) They cannot be held in an ISA.
d) Corporation tax is payable on profits from property rentals.
b) At least 90% of profits must be distributed to shareholders.
In relation to investment trusts, which of the following is true?
a) The trust can borrow for investment purposes.
b) The net asset value is the price shares are trading at.
c) Shares trading at a premium can be bought at below their net asset value.
d) The trust deed outlines the trust’s investment objectives.
a) The trust can borrow for investment purposes.
The aim of investment diversification is to:
a) reduce investment administration and documentation.
b) increase income from investments.
c) increase investment performance.
d) reduce investment risk.
d) reduce investment risk.
With regard to unit trusts, what does the term ‘open ended’ mean?
a) Clients can buy more units.
b) The fund manager can create an unlimited amount of units
according to demand.
c) The fund manager does not need to value the units.
d) There is flexibility in the taxation of units.
b) The fund manager can create an unlimited amount of units
according to demand.
A unit trust fund’s assets are owned and controlled by the
fund manager. True or false?
False. They are owned and controlled by the trustees.
Who is responsible for payment of capital gains tax on any
gain realised on the encashment of a unit trust?
a) The unit holder.
b) The trustees.
c) The unit trust company.
d) The fund manager.
a) The unit holder.
An investment trust is best described as:
a) a unit linked, single premium whole of life policy investing
solely in shares.
b) a trust that invests solely in fledgling companies.
c) a company that invests in the shares of other companies.
d) a partnership that invests in gilts.
c) a company that invests in the shares of other companies.
How can a private individual invest in an investment trust?
a) The investment trust manager creates more units.
b) By purchasing shares of the investment trust company on
the stock exchange.
c) The fund manager issues new shares.
d) By completing an application form for a share account and
submitting it to the investment trust trustees.
b) By purchasing shares of the investment trust company on
the stock exchange.
